For companies looking to unlock working capital and strengthen their supply chain, a supply chain finance program is a powerful lever. However, a supply chain finance program is only valuable when suppliers are onboard and using the program; if not, there are no benefits to the buyer or the supplier.
That said, effectively and efficiently onboarding suppliers to a supply chain finance program, while not an easy task, is critical to success for a variety of reasons:
Timely Access to Financing Options
When suppliers are efficiently onboarded into the supply chain finance program, they can quickly access early payments on their outstanding invoices. This helps suppliers improve their cash flow and working capital, enabling them to meet their financial obligations and invest in their businesses more effectively.
Reduced Administrative Burden
Streamlined onboarding processes reduce the administrative burden on both the buyer and supplier. It ensures that the necessary documentation and verification procedures are conducted promptly, allowing the supply chain finance program to become operational faster and without unnecessary delays.
Enhanced Visibility and Risk Management
Effective onboarding processes collect only the critical data about suppliers (that is to say, as little data as necessary). With this data, the supply chain finance provider can help buyers identify potential risks and assess the overall stability of their supply chain. This information enables proactive risk management, reducing the likelihood of disruptions caused by financially unstable suppliers.
Increased Program Adoption
A smooth onboarding experience encourages more suppliers to participate in the supply chain finance program. As the number of participating suppliers increases, the benefits of the program expand, leading to improved cash flow optimization and working capital management for the entire supply chain.
Strengthened Supplier Relationships
Efficient onboarding demonstrates that the buyer values their suppliers and is committed to supporting their financial well-being. This fosters stronger supplier relationships, increasing loyalty and collaboration within the supply chain. Suppliers may be more willing to offer favorable terms to buyers who provide access to early-payment options.
Improved Negotiation Power
With a robust supply chain finance program and a growing number of suppliers onboarded, buyers may gain better negotiation power when it comes to terms and pricing or product availability during times of limited supply.
Accelerated Growth and Innovation
By expediting the onboarding process, suppliers can quickly access funds for investment in research, development, and innovation. This can lead to the introduction of improved products and services, benefiting both suppliers and buyers and driving growth within the supply chain.
A supply chain finance program proves to be a powerful tool for companies aiming to optimize their working capital and enhance their supply chain performance. However, the success of such a program hinges on the efficient and effective onboarding of suppliers. Without active supplier participation, the full potential of the program cannot be realized, and the desired working capital lift remains elusive.
Be on the lookout for our next blog, where we will explore the LSQ approach to supplier onboarding and how our innovative process and technology ensures maximum adoption and helps buyers navigate the seemingly daunting task.
Mya Carriere is the Director of Customer Success at LSQ; in her role she works closely with SCF buyers and suppliers to ensure smooth onboarding and successful program partnerships.